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Ethan Belding
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Rather than taking a strictly financial view I focus on political, social, cultural, geographic and historical factors which impact global markets. My intent is to highlight overlooked non-economic factors that influence a variety of industries. Professionally, I teach Sociology, World Regional... More
  • The Implications Of Korean Reunification Part 1 0 comments
    Oct 18, 2013 3:28 PM

    More posts can be viewed at: resource-politics.blogspot.com/

    This is the first part of an analysis of the changes that we could expect to see in the event of the reunification of the Korean Peninsula. Please note that I am not arguing that reunification will occur. I am merely examining the likely outcomes of reunification and their implication on regional security and the global economy. The focus of this post is on how a united Korea could offset some of the costs of reunification. In future posts I will outline:

    • China's concerns vis-à-vis Korean reunification
    • Possible scenarios for regime change in North Korea
    • How reunification could impact US interests and military deployment.
    • How a united Korea will impact the global economy and the interests of other key powers in the Asia Pacific region.

    Introduction:

    The unthinkable can occur quickly. In November 2010 who would have argued that longstanding regimes in Tunisia, Egypt and Libya would fall within the next year? On June 27th, 1914 how many people thought that a war which would set the stage for the end of European global hegemony was imminent? The list of such events goes on and on. History has shown that the impossible can quickly become reality. Though we cannot determine the specific dates and set of circumstances that lead to such changes we can:

    • Identify troubled areas around the world.
    • Project how the problems in these regions might be resolved (by force, diplomacy or other means).
    • Determine the implications of these resolutions. 

    Such exercises improve our understanding of how the world is interconnected and better equip us to contend with political changes that impact the security and economic health of a region. Those who have forecasted the implications of potential shifts in international relations have a distinct advantage over those who are still trying to determine what is happening when rapid change is occurring. There are many parts of the world where the political landscape could change quickly impacting economic, political and military relations. The Korean Peninsula is one such example.

    Korean Interests: Security concerns between North and South Korea have persisted since the end of the Korean War. In fact both countries are still technically at war. The 1953 armistice merely means that the countries observe an uneasy truce. The potential for intra-Korean hostility has long been in the interest of both countries, the wider region, and the international community. Despite the benefits that a more stable Korean Peninsula would offer, the reality is that reunification, if it were to occur, would incur significant costs as North Korea lags far behind South Korea in terms of economic development and human capital. With that in mind it is important to examine ways in which reunification could be financed.

    It has been estimated that North Korea contains up to six trillion dollars worth of mineral wealth including tungsten, magnesite, graphite and zinc. All of these minerals have important industrial applications. South Korea certainly has an interest in improved access to zinc and magnesite, as it is dependent upon imports to service its demands for these minerals. Pyongyang is currently in the process of developing better ways of exporting these resources. For example, the construction of the Jilin-Rason Highspeed Railway will have a major impact on the greater integration of the North Korean economy into China. A reunited Korea would see improved infrastructure on the peninsula as well, which would further link the North to the global economy. That said, the exploitation of these minerals will take time and their value is subject to the volatility of the commodity market. Though these resources will presumably play a crucial role in funding Korean reunification and investing in the future prosperity of the country other ways of accessing capital will likely enter into discussions between Seoul and Pyongyang if they were to pursue reunification.

    North Korea's nuclear program could offer some economic advantage. It is unlikely that North Korea's nuclear program will be abandoned as a prerequisite for Korean reunification. That said, international pressure would make it difficult for a unified Korea to become a nuclear power. After all a nuclear armed Korea and China would push the Japanese to pursue similar capabilities. Such an action would increase tensions in East Asia which are already heightened due to Japan and China's conflicting territorial claims to the Diaoyu Islands. This reality and the need to finance reunification would limit Korea's ability to continue with the program. However, a reunified Korean peninsula could use the nuclear program as a bargaining chip. Essentially, we are looking at a deal that says, "We will give up our nuclear weapons if you (the international community) give us significant funding in order to offset the costs of reunification." Given that Korea could only give up the program once it is likely that the demands would be substantial.

    These factors and the increased investment that a unified Korean peninsula would likely see could go a long way towards covering the trillions of dollars needed for the reunification of the peninsula. Despite the economic advantages that a unified Korea would offer, its neighbors will have concerns about such a move. In the next post we will look at some of China's concerns regarding the Korean peninsula and examine how these concerns might be changing.

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